Friday, July 31, 2009

July 2009 closed with big wins for the bulls. The S&P 500 index is on pace for its best July since 1997. The Dow Industrials were up more than 8% for the month making it the best July since 1989. The NASDAQ composite is up over 8% for the month and up five months in a row making it the longest winning streak since August 2003. The U.S. dollar is took a big hit today, falling to its worst levels for the year, which is fueling a rally in the commodity space.

Further weakening in the US Dollar, could it be heading towards it's '08 lows? If so Gold would then make another run towards the $1000 resistance level. If this economy is picking up strength [JP Morgan analyst is projecting 3% GDP for Q3], then look for a pickup in the inflation trades.
My picks have been Yamana Gold (AUY) & Freeport McMoran (FCX). For the month of July commodity prices rose by 13.8%.

Thursday, July 30, 2009

Interesting CNBC interview with Emily Saunders, CEO of Sanders Financial Management said she projects an 11-percent retracement of the Dow and the S&P. “We expect [the Dow] to be back down to the 8,000 level and high 800 level on the S&P,”

“Right now, the major market indices are about halfway between the October 2007 highs and March 2009 lows and we think this is going to be a W-shaped recovery in terms of the equity markets and we are now in the top part of the middle part of the ‘W’.”

I've been noting on several charts that near term caution is warranted in equities.

The NASDAQ 100 ($NDX) is showing signs of being overbought. That said...the market can stay overbought as it stayed over sold several months ago. If the $NDX breaks out of the downtrend channel...then this rally is stronger than I believe. The easy money off the "oversold" bottom has been made, now earnings need to support prices. In the charts below it is apparent that the indicators point to overbought, especially on the percentage over moving average oscillator. Note the extreme reading in the $NDXA150R & $NDXA200R!

Wednesday, July 29, 2009

"With the NASDAQ having rallied now 12 days straight... I would also suggest traders/investors exercise caution and use trailing stops or hedge with options." ...as the charts were giving a topping signal in many of the stocks I've reported on this blog.

Below I have an Apple chart, this stock has been resilient in the market...but maybe seeing some signs of exhaustion here. I would use the same cautious approach and either lock in some gains or use option hedges. Near term caution...long term bullish.

Crude Oil ($WTIC) took a hit today, it's resting currently on the trendline. As is the US Dollar after putting in a double-bottom, any strength here could see crude test its July lows $58. Expect further declines on equities ($SPX). I still believe that this will be a minor pullback and that the $SPX needs to see a blow off top near 1,050.

Tuesday, July 28, 2009

One of the indicators I track for both long & short term trades, is the percentage of stock trading over their respective moving averages. On the shorter term I use the 50 day moving average, here on the S&P 500 the chart is $SPXA50R. When over the 80% mark is a red flag SELL, it could be quick or stay overbought as the $SPX rises, again I use other indicators and this is not a stand alone...but a significant one albeit. Now on a longer term call, I incorporate the 150 & 200 day moving average percentage. When all 3 moving averages trend over 80...IT'S A SELL and viceversa when below 20% a BUY. Although not a focused and pinpoint timing indicator, it can be used to avoid the recent major decline of 40% in the markets...as well as a re-entry into an oversold market. If you ignored the Sell Signal in early 2007 and held a $10,000 position in the $SPX would be worth $6,760. Where as if you'd sold between $SPX 1400 & 1500 & then re-entered back around 700/800...that $10,000 would be worth $13,000! Almost double, not to mention what you could of made doing nimble trades using the $SPXA50R in the decline or if you used leveraged index ETF's or options??? My observation is that the $SPX will continue to rise and test the 1,000/1050 resistance level before correcting back towards it's moving averages. One other note, I've mentioned this in prior posts, look at the $SPX weekly chart using the 26 week EMA against the 52 week SMA...that's close to a long term BUY signal. But my technical/fundamental & sentiment indicators point to a blow off rally coming soon and then a pullback into Sept/October in the next earnings season to support stock valuations. If this recovery shows improvement...especially on the lagging jobs reports [2010] then the $SPX can possibly head towards the 1,200 area by the end of 2009.

The dollar traded near the lowest level this year against the currencies of six major U.S. trading partners on speculation the global economy is shaking off the worst recession since World War II, sapping safety demand. ~read more~

Thursday, July 23, 2009

What exactly is the Value Line Arithmetic Index ($VLE), and how does it differ from the Value Line Geometric Index ($XVG)? Both indexes are products of Value Line Inc., developers of the popular Value Line Investment Survey. The two indexes both consist of the approximately 1,700, equally weighted stocks that make up the investment survey. The principal difference between the two indexes, however, is the way that they are calculated. The Arithmetic Index consists of a simple mean or average in which the sum of the items is divided by the number of items. The Geometric Index, on the other hand, is a bit more complex. According to Value Line's description at www.valueline.com, the geometric average involves taking the nth root of the product of n items. If n = 4, then the geometric average of the four items would be the fourth root of the product of the four items — in other words, multiply the four items together and take the fourth root of that product.

What difference do these computation methods make on the respective indexes? Generally speaking, both Value Line indexes do a better job than the S&P 500 and Dow Industrials do at picking up the price action of smaller stocks. Because both averages are equally weighted.

One of the more particular aspects of the Arithmetic Index ($VLE) is that, based on the way the index is put together, it tends to advance farther than the Geometric Index (XVG) in a bull market and decline less in a bear market. This has led some to claim a preference for the Geometric Index, which is believed by its adherents to be a truer reflection of stock strength than its Arithmetic alternative.

These picks have been suggested over the last 3 weeks & have an average gain of 17.6%. With the NASDAQ having rallied now 12 days straight... I would also suggest traders/investors exercise caution and use trailing stops or hedge with options. *see disclaimer below

Wednesday, July 22, 2009

Looking at the $SPX & $COMPQ weekly charts using a 26 weekly ema & a 52 week sma. As in previous post on this indicator, I like to use it as a confirmation BUY/SELL indicator. Note the 950 level on the $SPX while the 26/52 have not intersected as of yet...while on the Nasdaq $COMPQ the 1,900 level has been surpassed & the 26/52 are kissing?! Apparently the Nasdaq has been leading on the technology sector's strength. [*note: the A50R, A150R & A200R for each index, indicates the percentage of stocks in that index trading over their respective 50, 150 & 200 ma's...below 20 oversold & over 80 overbought]

Tuesday, July 21, 2009

Apple reported after the close today and as I expected blew the cover off the ball, everyone knew they'd beat the sandbagged numbers, estimates were for $1.17 they came in at $1.35, I'd called for $1.30. But they just blew away the metrics in ipod, iphone and Mac sales. This is the first time iphone revenues surpassed ipod and the CFO in the conference call stated that manufacturing of the 3Gs can not keep up with demand. In a report from the Wall Street Journal online (LINK) tonight they stated that Apple has become a cell phone company...I disagree. Apple is using the iphone to bring the consumer into its store, the Halo Effect... note* 50% of Mac sales for Q3 were to "NEW" Apple buyers! Hello!!!
As for valuation see my post from the other night on P/E's....

While going through some tech stock charts today, I was catching a pattern in the support/resistance levels on a few of the big boys. *Note the July '08 lows and now...Hmmm? Looking at several tech indices didn't show this pattern though.

The last time Apple reported disappointing earnings was Q4 2002 & 4 times since 1999. The norm has been for the stock to rise into earnings and then selloff after reported, seems as if this time they started early? We'll know shortly!

Monday, July 20, 2009

Is Apple cheap, well lets look at the numbers:Current analyst estimates current year and next year earnings linkThe stock @ $152.91 is selling at a trailing P/E of 27.50 & a forward P/E of 23.85; PEG 1.53 has 0 Debt and $28 per share in cash!

Take a look at the chart below, looking at the last 4 years. AAPL was overbought near a 50 P/E & a BUY/oversold under 30. Even at it's worst- AAPL was under a 20 P/E...so is 27.5 then too expensive??Apple reports after the close tomorrow and consensus, as reported by Thomson Financial, calls for $1.16 per share...I see $1.30. With Intel & Texas Instruments beating expectation, I feel secure in AAPL hitting it out the park.

Gold is currently trading $951.80 as it makes another run towards the $1000 level. Below is a chart of Yamana Gold (AUY) after putting in a Bullish Divergence signal several days ago, it looks very bullish & has just crossed over resistance & 50-ma.

Sunday, July 19, 2009

Was last weeks 7.44% [most in last 10 years] move just shortcovering? We have alot of companies reporting this week starting with HAL on Monday, AAPL on Tuesday...finsihing up with MSFT Thursday & SLB on Friday. My pivot day will be Tuesday with Apple reporting plus Benanke's testimony to the House of Reps.& then Wednesday in front of the Senate.I'm looking for several "BREAKOUTS"...keep focused and get ready to take profits on any breaks below support.

Friday, July 17, 2009

Investors have been keenly focused on earnings reports this week, hoping to find more concrete signs of life in the economy and validation that a huge rally in stocks this spring was justified. So far, the results have been varied. Strong earnings from four of the largest U.S. banks have been encouraging, but there are still signs that the recession's grip hasn't eased as much as hoped such as higher loan defaults.

BofA, which has struggled more than some of its peers from loan losses, beat Wall Street's estimates just as Goldman Sachs Group Inc. and JPMorgan Chase & Co. did earlier this week. However its profit was down from a year earlier as losses from delinquent loans continued to climb.

Citigroup, another troubled bank, surprised Wall Street with a $3 billion profit instead of the big loss analysts had expected, but results were boosted by the sale of a majority stake in its Smith Barney brokerage.

GE's earnings fell 49 percent on losses at its financial unit and weakness in industrial businesses. The profits topped forecasts, but revenue came in $3 billion below estimates. Those reports followed mixed results from tech giants Google Inc. and IBM Corp. late Thursday.

Google said its second-quarter profit was its biggest since it went public five years ago and several analysts raised earnings and target prices. However, investors were concerned that revenue growth continued to decelerate. It was Google's second straight quarter of single-digit revenue growth. IBM reported revenue below expectations, but its profit continued to improve and the company raised its full-year forecast.The next big mover I'm eyeing next week is Apple [AAPL] which reports Tuesday.

Wednesday, July 15, 2009

Things really do change fast in one week, from a Head & Shoulders breakdown to a short covering rally. With just 15% of the S&P500 companies reporting and 85% in the coming 2 weeks the $SPX is approaching the 950 level once again. If we continue to get outstanding earnings reports from Google, IBM, Bank of America, JPM and Apple and if the $SPX breaks over 950...well watch how fast things rally to 1,000!

Below is a comparison chart from 2002/2005 & the present~ I've posted a few time on this blog as well as ITZMYMONEY... again the 950 level is key as well as the 26 week ema and the 52 week sma. Keep and eye on these key indicators.

I've made several calls this month in which the charts technicals indicated entry points. Below is a list of entry level prices (see past posts for more details) and the current intraday price today and the return percentage.

As I mentioned the other day: This week will be the earnings cycle with big names in the tech sector and the banking sector that are likely to set the tone for the rest of the earnings period. The names in the line up are GS, INTC, CSX, NVLS, XLNX, GOOG, HOG, IBM, JPM, NOK, BAC, C, & GE most likely a pivotal week in the markets.

Well Goldman Sachs (GS) & Intel(INTC) have so far been the catalyst to sparked what looked like a break below the necklines of several index Head & Shoulders patterns. Also, I noted that we were looking at lower highs & lower lows...that too has been negated. Not only was several necklines major support so were 200 moving averages on the indices. The transports have been strong as well as bullish words from Meredith Whitney on the banks.

So...the trend has now turned bullish and the next hurdle is the recent highs, JP Morgan reports as well as Bank of America, lets see how the consumer weighs on these companies. As for now technology is driving this market...the biggy I'm look towards is Apple next Tuesday.

Tuesday, July 14, 2009

Yamana Gold [AUY] chart appears to have put in a Bullish Divergence pattern. The Point & Figure chart gives a Price Objective (PO) of $9.75. Nice gap up today, they report earnings on August 4th. Earnings estimates

Monday, July 13, 2009

What appeared to be a breakdown of the $SPX last week, with the index hovering at the neckline of it's Head & Shoulder formation...rallied on the Meredith Whitney comments on CNBC. However is this really sustainable? We are set to get a number of market moving earnings reports over the next several days. Goldman is set to report before tomorrow's open and the stock is up 5% in after hours.

Getting back to Whitney's comments she set a target on GS of $168...however remained her bearish self forewarning that unemployment could rise to 13%!!!

Below I've highlighted several key technical indicators I track. Back in 2007/2008 there were early SELL signals and then a confirming SELL. We've recently gotten a early BUY signal in March and it maybe a few weeks until we see a BUY confirmation. As most know the stock market is always 6 to 9 months ahead of an economic recovery. It continues to be uncertain about the jobless outlook. Talk of a second stimulus package by Laura Tyson spooked the markets last week. So one has to be suspect of today's rally. Believe me we could easily be down 200 point tomorrow. Also don't forget Friday is option expiration. I'm still looking at the necklines on some of the indexes chart patterns and on the $SPX my downside target of 825 to 850 remains and a break out over 950 would make me believe that this bull has further to go.

Apple (AAPL) reports next week, $135 has been recent support & $145 resistance. I've posted a weekly chart below. Apple has and continues to be one of the stronger tech stocks in the recession and with its new 3Gs iphone out, plus 2nd half school & holiday sales approaching....Apple is set to explode higher!

Sunday, July 12, 2009

Dow Jones Industrial Index ($DJIA) The Dow has now firmly broken below support at 8200 and the bottom of the head and shoulders neckline. On both Wednesday and Friday the Dow found interim support at 8100 but the clear target is still 7750. ...chart

S&P 500 ($SPX) Right at the neckline of the Head & Shoulders pattern along with the 200 moving average. The S&P will be hostage to any Dow move next week because of the number of Dow components reporting. chart

NASDAQ Composite ($COMPQ) Although slipping the NASDAQ isn't as bad as the DJIA or S&P 500, the Goldman and JP Morgan upgrades to tech stocks are keeping the damage to the tech indexes to a minimum. The 1,650 level looks like a possible down side target. Same scenario for the $NDX NASDAQ 100 1350.chart

Russell 2000 Small cap ($RUT) the treshold here is 472 and downside risk is to the 50% Fibonacci Retracement of 420. chart

Dow Jones Transportation Index ($TRAN) Support at 3,000 with a Point & Figure double breakdown price objective of 2,650 chart

This week will be the earnings cycle with big names in the tech sector and the banking sector that are likely to set the tone for the rest of the earnings period. The names in the line up are GS, INTC, CSX, NVLS, XLNX, GOOG, HOG, IBM, JPM, NOK, BAC, C, & GE most likely a pivotal week in the markets.

The environment for investors remains uncertain as fears of a “double dip” recession spread. Even though there are very serious problems with consumer confidence and unemployment, easy year-over-year earnings comparisons in the coming months should help the overall stock market, especially if there are positive economic headlines.This recession is already longer than the average recession and economists expect U.S. GDP to pick up by August. As spending from the $787 billion spending/stimulus gathers momentum in the upcoming months, the activity should help economic growth. Both the stock and bond markets are recovering from their liquidity meltdowns. Since January, I see some evidence of a return of investor confidence as money has been pouring into bond mutual funds and steadily rising. Indeed, the recent market rally is an even stronger indicator of investor confidence as investors began adding money to equity mutual funds taking advantage of beaten down stock prices. In other words, liquidity has been improving as investor confidence has returned.Laura Tyson, an Obama Administration advisor and U.C. Berkeley professor, supports another round of stimulus. link

On July 10th, the day after I posted my comments/charts on RIG, CNBC's Fast Money "Stock of the Day" ~ Joe Terranova recommended putting Transocean on your radar.
....Both the technicals and fundamentals look strong in this name, he explains. It’s holding the 200-day moving average. Also they’re reducing costs and raising cash. I wouldn’t be surprised to see a buy-back.

Friday, July 10, 2009

An IMF forecast suggests by next year the economies of China & India could be on fire. They says China's economy should grow by 8.5% in 2010 while India will likely see growth of 6.5%. Link to IMF Report

The number of U.S. businesses featured in the annual Fortune 500 list of top global companies fell to lowest level ever, Fortune Magazine said, while more Chinese entries appeared than ever before.Fortune 500 link

The number of U.S. companies in the top 500 fell to 140, the lowest since Fortune began the list 1995. Overall, China had an unprecedented total of 37 companies featured on the list, with nine new entries and the others climbing in the rankings.

Chinese auto sales climbed 48 percent in June, signaling that the government’s 4 trillion yuan ($585 billion) stimulus package is reviving the world’s third-largest economy. The country is “a positive force” that will help revive global growth, billionaire George Soros said yesterday. Alcoa Chief Executive Officer Klaus Kleinfeld forecast that demand in China will grow after the company posted a smaller-than-estimated quarterly loss. For the first-half of 2009 China auto sales topped 6.1 million while in the US they were only 4.8 million. Link

So, as I've been blogging for the last few days, the short term maybe bearish however on the longer term outlook globally, suggests owning commodities will be profitable.

One has to ask have commodities been oversold or are emerging markets overbought? I'd be careful with the EEM, but I like the FXI, especially based on the robust IMF outlook.

Continue to expect volatility and potentially weaker copper prices near term, BUT with China and India reporting that they expect strong growth in 2010 investors should use the neartem weakness to buy. FCX look attractive above $45, if you enter here keep your STOP tight @ $4, price objective $51 for '09 $60 for '10. Citigroup raised its rating on Freeport to "buy", from "hold" Wednesday, while also increasing its price target on the company's shares to $58 from $53. Freeport (FCX) reports quarterly earnings on July 21st.

With Oil ($WTIC) hitting just under the $60 level, trend line & the 38.2% Fibonacci retracement, I see a leveling off and perhaps a rally in August. The oil services companies (OIH) has put in a 50% retracement and the top holding in the OIH is Transocean (RIG). The stock is in the BUY ZONE and warrants accumulation with a stop set @ $60.

Cramer pulled no punches on Tuesday when he called the oil futures market a “total farce.” He blamed unregulated speculation for artificially inflating crude prices to the detriment of investors and consumers. Worst of all, he’s not sure the government can stop it. See story here

It's been about one year now that the Oil Volatility Index has been out. Below is a portion of a CNBC report and an annotated chart I've posted.

An Oil VIX above 50, for instance, doesn't merely represent the threat of a move higher, but rather indicates that traders are concerned about unpredictable moves either way. At the same time, the Oil VIX has been a somewhat less reliable predictor considering it is barely a year old and lacks the history to establish reliable benchmarks.

"There's risk in both directions," said one oil trader at the CBOE who asked not to be named. "I think what it is measuring is there's a growing amount of bimodal thinking on this."

Yet the Oil VIX is about half its level from December, also indicating that traders believe the worst of the volatility has passed and that trading is more likely now to find a range.Read full CNBC Report at this link

I annotated an asset allocation chart back in June and questioned where the markets would head next? Well, it appears as if I was correct...commodities & stocks got ahead of themselves and are being sold, with money shifting towards bonds. Now...when does it end?

Wednesday, July 8, 2009

At first I expected AUY to rally off its uptrend channel which it did. However...it hit resistance at the $9.50 level and has now come back down to retest the lower end of that channel. Odds favor a test of it's 200ma @ $7.66.

This is an interesting observation of ~ How Gold ($GOLD) Has Been A 4-Month Leading Indicator To Crude Oil ($WTIC). Also note, that there's a 76% positive correlation between Crude Oil ($WTIC) & the S&P 500 ($SPX) ~see chart~...so expect stocks to rally this September and the current selling to continue.
Also, a CNBC Vid Clip: Russian President Dmitry Medvedev told the G8 Summit is is impossible to regulate oil prices via administrative measures and also suggested a price of $70 to $80 a barrel as "fair." Andrei Gaidamaka, Lukoil deputy VP, shares his insight.

Alcoa (AA), will kick off earnings season this quarter when it reports after the close today. Taking a glance at the AA & $CRB Index charts shows the 50ma's crossing over their 200ma's but trading below them at support. Check out the heavy July $10 call Open Interest as well as Volume on Alcoa link. AA $10 calls: Open Interest = 115,283 & vloume 26.576. Next the RSI on the $CRB is oversold in the 20 range as well as the Stochastics. I expect a bouncein AA as well as commodities, if you are planning on playing this keep your STOPS tight.

Tuesday, July 7, 2009

As with the $SPX, I like to use the A50R, A150R & A200R oscillators. In this weekly chart of the NASDAQ 100 ($ND) you couldn't ask for a more perfect technical chart! All three of the moving average indicators trading over their ma's peaked over their 80 levels, giving an overbought reading! Along with that the index made a double bottom in March, then rallied to it's 38.2% Fibonacci Retracement level and has now started to retrace lower. Where to next? I see the recent lows (1,350) being tested, I see also the similar action to the March '07 pullback.... lets keep an eye on this. One can use the NASDAQ100 Trust ETF (QQQQ), Apple is the top weighting in that.

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